Create New Organizational Structure to Successfully Reduce Costs

Annual cost reduction targets have most healthcare organizations scrambling. Despite concerted efforts, many internal cost reduction initiatives “fail to produce the level of savings required” as Liz Kirk writes in Healthcare Finance News.

Why is that? Many factors can contribute to the success or failure of an organization to achieve savings’ goals, but the most common mistake is not taking a holistic approach. Ms. Kirk contends that rather than a conventional cost reduction approach lead by the CFO, a successful initiative should include the financial and operational senior leaders, as well as support teams and cost leaders. The key is to effectively balance quality and patient satisfaction with savings.

This approach is not to be confused with across the board cuts that she notes can produce the typical outcome where “so-called improvements to reduce costs ultimately sub-optimize how patients flow through the system, resulting in unexpected bottlenecks, angry patients, or worse…Doing more of the same will only get us more of the same, which isn’t working.”

So, what will work? Ms. Kirk recommends a multi-departmental, organization-wide approach that looks closely into operations, challenges convention and considers new care models. This approach also potentially includes building new organizational structures in order to deliver high quality of care, with a commitment to reduce cost and redundancies.

Physical integration is a way to draw greater function from a healthcare network and facilitate effectiveness from a new organizational structure. A broad-reaching initiative, such as an integrated healthcare transportation system, can serve as the catalyst to help healthcare networks squeeze bigger savings out of many areas. Physical integration allows healthcare organizations to combine redundant functions, reduce costs through shared capital equipment and enhance their visibility and control.

Ms. Kirk concludes, “Many have reached the conclusion that this time cost reduction is not an initiative, but rather something that will need to be a core competency for every healthcare delivery system.” In healthcare, this is the challenge of our times, to which we must rise.

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